Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Alleged Mortgage Relief Services Scam Operators Agree to Settle FTC Suit, (Mar 11, 2013)

By E. Darius Sturmer, J.D.

A group of defendants that includes two individuals and seven affiliated companies has agreed to surrender certain assets and to injunctive relief in order to settle FTC charges that they deceived consumers through two related mortgage relief services scams. According to the agency, the defendants fooled cash-strapped consumers into believing they could hold onto their homes and reduce their mortgage payments by either suing their mortgage lenders in so-called “mass joinder” lawsuits or buying “forensic loan audits” (FTC v. Lakhany, FTC File No. 112 3136, Case No. 8:12-cv-00337-CJC-JPR).

As part of a crackdown on mortgage relief scams, the FTC filed a complaint early last year in the federal district court in Santa Ana, California, against the principal individual defendant and five companies he controlled, later adding the remaining three defendants.

The complaint alleged that the defendants’ first scam involved holding themselves out as a specialty law firm called Precision Law Center and making the false promise to consumers that if they sued their lenders along with other homeowners in so-called “mass joinder” lawsuits, they could obtain favorable mortgage concessions from their lenders or stop the foreclosure process. According to the complaint, they charged $6,000 to $10,000 in advance, but failed to follow through with the suits, all of which were dismissed shortly after filing.

The second scam typically charged consumers between $795 and $1,595 for a so-called “forensic loan audit” that would find lender violations 90 percent of the time or more, the FTC said. These “lender violations,” the defendants claimed, would force lenders to give them better mortgage terms. In fact, the complaint stated, consumers rarely if ever obtained better mortgage terms as a result of these “audits.”

Three settlements, each of which was approved by the court on February 28 and entered on March 1, imposed judgments aimed at reflecting the total consumer injury attributable to the defendants they covered. An order against the principal individual defendant and his five companies imposed a $3 million redress judgment, which was partially suspended based on the individual’s inability to pay. An order against the other individual and his company, imposed a $1.75 million redress judgment and requires those defendants to turn over virtually all of their known assets, including a Ferrari and two rental properties in Las Vegas. A third order against an affiliated company requires it to turn over to the FTC all funds it received in connection with the “mass joinder” scam, which amounted to $100,000. All of the defendants were prohibited from making deceptive claims about any product or service, and all but the latter company were banned from marketing mortgage- and debt- relief services.

Companies: Precision Law Center, Inc.; Precision Law Center LLC; National Legal Network, Inc.; Assurity Law Group, Inc.; The Credit Shop, LLC; Fidelity Legal Services LLC; Titanium Realty, Inc.

News: ConsumerProtection FederalTradeCommissionNews